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How to create and approve expense reports

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    Quick insights

    • An expense report is an itemized list of expenses made by a business.
    • Expense reports usually contain the amount of a purchase, its expense category and other details.
    • Many companies use accounting software to help streamline the expense report approval process.

    If you run a business, you likely have business-related expenses. Even freelancers and small businesses typically have basic expenses, from travel and mileage to accounting software and office supplies.

    Many businesses choose to monitor business expenses via expense reports. Expense reports allow employees to include detailed information about any purchase made on behalf of the business. This can be useful for tracking cash flow.

    Below, we cover the benefits of expense reporting, plus how to create and approve reports.

    The importance of expense reporting for businesses

    Before you begin tracking expenses via reports, you may want to learn more about why it can be helpful for your business.

    Here are a few benefits of expense reporting:

    • Keeping tabs on cash flow: Expense reports can provide a clear picture of a company’s overall spending and cash flow. This can help when creating budgets or forecasting for the future.
    • Identifying patterns in spending: Analyzing reports may help you understand categories in which you’re overspending, or other opportunities for cutting costs.
    • Reimbursing employees in a timely manner: An organized expense reporting process may streamline employee reimbursement for business expenses. This process may also help businesses better manage their cash flow.

    A common thread in each of the above benefits is overall financial organization. Generally, accurate day-to-day bookkeeping can help companies stay on top of accounting and track progress toward financial goals as the business grows.

    Creating an expense report

    Companies typically choose between using spreadsheet templates and expense management software to create expense reports. Software can help automate parts of the process, but freelancers or smaller businesses may not need advanced technology if they only have a few expenses.

    Expense reports are itemized lists that usually contain the following details:

    • Brief description of purchase
    • Corresponding receipts
    • Date of purchase
    • Expense category of purchase (like “rent” or “mileage,” for example)
    • Subtotal of each category
    • Total of all purchases
    • Account the purchase was charged to

    Approving an expense report

    After you create an expense report, you can submit it for review. Not every small business has a dedicated finance department, so you may need to appoint a specific person to review and approve reports.

    It also may be wise to create a clear expense report schedule. For example, instruct employees to submit reports by a certain date each month to receive reimbursement by the end of the month. Additionally, you may want to ensure that employees understand differences between expense categories and which ones are reimbursable.

    If you’re using spreadsheet templates for expense reports, you can email them to the chosen finance stakeholder. If you’re using expense management software, you may be able to automate the process. This is because this type of software can usually automatically send reports for approval.

    Using credit cards to help with expense management

    If your company has a business credit card, you may choose to issue individual employee cards to employees. This allows employees to charge expenses directly to the company account. This removes reimbursement from the expense management process, which can create more visibility in terms of cash flow.

    Some business credit cards also have built-in expense management features. The Ink suite of business credit cards, for example, issues employee cards at no additional cost and allows the primary cardmember to set spending limits for employees.

    And, in general, using a business credit card can be a helpful way to separate business and personal finances for financial organization purposes.

    In summary

    Whether you are a seasoned entrepreneur or have just started a new business, you may benefit from expense management. Creating expense reports for each business-related purchase can be a good starting point.

    After you begin creating expense reports, it can be helpful to appoint someone as the approver. Additionally, it can be useful to create company-wide expense management policies so individual employees understand how to create expense reports, when to submit them and what expense categories are reimbursable.

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